Can My Business Rely on Electronic Signatures in Commercial Contracts in England?

Every business owner signs various commercial documents each year. Twenty years ago, most contract signatures occurred on a physical document sent to the other party by post. Nowadays, however, an increasingly large number of commercial agreements involve using an electronic signature and email delivery. This article will explore the increasing trend of electronic signatures within commercial contracts and whether these signatures are legally binding on the parties involved.

What is a Commercial Contract?

A commercial contract is a written agreement between businesses recording the terms of a commercial deal. The more complex and valuable the commercial arrangement, the longer the document will likely need to be. Naturally, it is vital to ensure that any commercial contract is correctly signed as they are only binding absent a valid signature in limited circumstances under English law. Let us consider how electronic transactions work and whether electronic signatures create legally binding commercial contracts in England.

What is an Electronic Signature?

The broad definition would be a digital signature, including any signatures entered through an electronic device. So, for reference, a scanned version of a printed document with a physical signature is not an electronic signature (but a scanned version of a physical copy).

There tend to be three main methods of electronic signatures:

• ones in which a party uses a touchscreen or trackpad to mimic their physical signature;
• ones where a party simply types their name through a keyboard; or
• ones where a party uses a handwritten-style font to appear more signature-like.

On a personal level, the author tends to sign documents through an electronic signature platform on a smartphone. Some tablets and smartphones enable you to use a stylus to sign simple contracts more naturally.

Are Electronic Signatures Legally Binding?

In most situations, electronic signatures within electronic documents are equally as binding as physical signatures. This is the case whether it is simply a typed name or an attempt to mimic a physical signature.

The Electronic Communications Act expressly confirmed this, and the Law Commission approved this in further detail in September 2019. At that time, the Commercial and Common Law Commissioner wished to ‘make it clear that an electronic signature can generally be used in place of a handwritten signature as long as the usual rules on signatures are met’.

Part of the reasoning behind the acceptance of electronic signatures was that many businesses were already using them and they were no less secure than a physical signature. This is particularly true when considering that it is possible to physically sign a document with an ‘X’, initials or a printed name.

The Law Commission also correctly noted that our courts have held clicking an “I accept these terms” box on a website to constitute an electronic signature. Hence, they were prevalent within business life.

Are There Any Complications With Electronic Signatures?

Yes, there are two main difficulties with providing a signature in electronic form.  

First, some businesses continue to have concerns over fraud and do not wish to accept electronic signatures. However, a fraudulent signature is a rarer phenomenon within commercial matters than personal life. Furthermore, the risk of fraud is similar to a physical signature. This is because an unwitnessed signature is a poor means of evidence.

This leads to the second complication, which is the witnessing of a signature. On a practical level, it is far easier to witness a physical signing of a document than an electronic one. Given that it is a statutory requirement that certain commercial documents require a witness, some businesses still find it easier to print the copy and sign it in the physical presence of a witness.

Security of Electronic Signatures 

Some electronic signatures offer extra layers of security.  

One example is known as a qualified electronic signature. This is a type of valid electronic signature that meets the requirements of a piece of EU legislation through:

1. being created by secure signature creation software;
2. being linked to a qualified certificate (which provides electronic identification of the signator); and
3. offering data to the recipient regarding the name of the signatory.

It is important to note that our law does not require electronic signatures to be anything other than a digital mark within a document. So, in the same way, you can mark a physical document with ‘x’ as your signature to have legal effect, you can do the same within a commercial contract.

However, many business owners like to use (and receive) more secure electronic signature forms to combat fraud and enhance security.

Key Takeaways

Over the last two decades, electronic signatures have become increasingly prevalent in everyday business. In fact, we have probably reached a tipping point where more commercial agreements are signed digitally than physically. In legal terms, in the same way, a verbal contract is equally as binding as a written one, the electronic execution of a contract is as binding as a physical signature.

If you need help signing a commercial contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page. 

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